The Digital Economy and the Demise of Retail Malls

Digital economy is about transacting business entirely on the Internet, which evolves around ecommerce, Internet banking, mobile shopping, Internet advertising, drone delivery and a number of new technologies supported by high-speed Internet bandwidth, which has increased from a paltry 2G to 5G in the last couple of years. This has led to a remarkable increase in mobile marketing, as well as a tremendous improvement and ease of digital fund transfer processes across all platforms.  

Likewise, the digital marketing industry has continued to play pivotal role in the promotion and growth of ecommerce; the proliferation of social media sites, and the massive impact it has created in the ecommerce sector, can not be overlooked. Social media has provide a platform with an extra-ordinary influence in terms of audience and lead generation for advertisers and retail merchant stores to promote their content.

It is this dramatic growth of the ecommerce sector that now resulted in what many fear is the end of brick and mortar retail chain outlets. Experts have predicted that by the end of this century, more than 80 percent of the buying processes will no longer require face-to-face interaction, as most purchases will be online and payment for items will be through digital fund transfer, which may result in the shutting down of several hundred of malls over the next decade.

In January last year, Walmart alone announced the closure of 269 stores worldwide as part of the company's new strategic plan to divest from brick and mortar super chain stores and start investing massively on ecommerce. In an article published in USA Today, in January 16, 2016, Walmart was reported to have shut down 102 Walmart Express stores, 6 discount centers, 12 Supercenters, 23 Neighborhood Markets, 4 Sam's Clubs and 7 Amigo stores in Puerto Rico.

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The threat of the extinction of shopping malls is very real, especially in the face of the current store closures by some of the major mall operators such as Walmart, Macy’s, Sears and JCPenney, which have now closed hundreds of their retail outlets already. All of these department stores are now embarking on aggressive divestment of their brick-and-mortar retail assets and investing heavily on online merchant sites.

Johan Blom, the Center Manager of Novare Lekki, owners of one of the largest retail chain stores in Africa, disclosed that the high rate of closure of malls around the world, especially in the United States, is a great source of concern and it puts immense pressure on the future of their assets and investments in Africa.

The rate of demise of super chain stores are increasing rapidly, especially in the last couple of years, and online merchant stores are becoming more in vogue because of the growing presence of mobile marketing and the ease of processing digital payments. Brick and mortar store operators are beginning to notice the obvious threat to the continued survival of their businesses, which is caused by the remarkable performance in sales revenue that some of the major online retail merchant stores have recorded in recent times; and are now looking on the Internet for solace.

The logistics and personnel costs of operating an online retail merchant store is extremely lower than what is required to run a brick and mortar retail outlet. The retail marketing industry reports of last year and part of this year show that the online merchants stores are declaring higher profit margin as against physical stores. The global revenue profile of online merchant stores in 2017 has reached $294 billion and has potentials to grow to $414 by 2018.

In the face of the apparent gloom currently experienced by retail chain stores and department stores, which is quite eminent in Europe and the United States, it is interesting to find out that new malls are springing up in parts of Africa, especially in Nigeria and Ghana. West Africa is emerging as the new investment green-house for department chains, and it has very high potentials to be the next biggest investment location of retail chain stores in the world in the next five years.

Factors responsible for this growth are not far fetched. Firstly, online merchant stores are in its infancy stage in most parts of Africa, except in South Africa where it has existed for some time. Secondly, the online fund transfer and digital payment infrastructure are relatively, just being developed and it is going to take a while to reach full maturation; the stage where a decline will start to set in, just as it is currently being experienced in Europe and the United States.